State reconsidering build-in-state rule for ferries

OLYMPIA — Frustrated with the high cost of building state ferries, lawmakers set out Tuesday to impose stricter control on contracts and possibly end a requirement to build vessels only in Washington.

A bill drafted by a Republican state senator responds to a recent state audit that found the ban on building ferries outside the state and lax oversight make it more expensive to build vessels in Washington than elsewhere.

In addition, requiring Washington State Ferries to only contract with shipyards with state-approved apprenticeship programs further constricts competition and drives up the price, according to the audit.

At a hearing Tuesday, Sen. Curtis King, R-Yakima, said his bill will make lawmakers address these issues though he doesn’t expect any decisions this session.

“We need to have a conversation about this. Why do we pay what we pay?” said King, who conducted the hearing in the Senate Transportation Committee on which he serves as co-chairman.

Former State Auditor Brian Sonntag released his report in January, lighting a fuse under lawmakers, particularly those in districts with ferry service.

They were particularly angered by revelations that Washington paid $83.6 million for the ferry Chetzemoka in 2010, nearly $50 million more than what a Massachusetts ferry operator paid three years earlier for a boat with a comparable design.

State ferry officials said they paid a premium price to get the vessel built in 18 months rather than the industry standard of 24 months. They needed it operating on the Port Townsend-Coupeville route after the state removed the Steel Electric-class ferries from service out of safety concerns.

Auditors made nearly a dozen recommendations and King inserted many of them into Senate Bill 5858.

The bill requires construction contracts be for a fixed price and contain a contingency of no more than 5 percent; contingencies in the recent ferry contracts ran as high as 20 percent. It also calls for hiring an independent third party as a project manager to keep tabs on all aspects of construction including change orders.

The most significant move would allow out-of-state companies to bid on and build ferries in the future.

Lawmakers first inserted a Build in Washington provision into a 1993 law paving the way for construction of the 202-vehicle Jumbo Mark II class of ferries.

Since then, it’s been included in laws authorizing four new 144-car Olympic class ferries — two are under construction now — and the three completed 64-car Kwa-di Tabil class ferries used in rotation on the Port Townsend-Coupeville route. These are the Chetzemoka, Salish and Kennewick.

In each case, only one ship builder — Todd Pacific Shipyards — qualified to bid on those projects. This lack of competition added untold millions of dollars to the projects, the audit found.

The audit also considered the economic benefits of such a policy. It estimated $150 million in spending on ferry construction — a little more than what was spent for the Salish and Kennewick combined — would support 322 jobs directly and another 1,355 jobs in other sectors of the economy.

“Your decision to build in Washington has revitalized the maritime industrial sector,” said Fred Kiga, senior vice president of Vigor Industrial, which bought Todd in December 2010.

Sen. Doug Ericksen, R-Ferndale, pressed Kiga on whether the state can afford to keep the policy if it’s going to push up the amount charged to taxpayers.

“How much extra do taxpayers have to pay? Is 40 percent too much? Is 35 percent too much?” he said.

He said he’d “rather have the boats built in Tacoma or on Whidbey Island than in Louisiana” but wants to get competitive prices for taxpayers too.

Democrats on the committee shied away from supporting the bill though several said more needs to be done to lower costs.

Afterward, Sen. Nick Harper, D-Everett, said it would be “irresponsible to deliberately ship Washington jobs out of Washington” given the unemployment rate among building trades workers.

“We all talk about creating family wage jobs in our state and this requirement does exactly that,” he said. “I will not support its repeal.”

Also Tuesday, the House Transportation Committee took on the issue of ferry construction in a different fashion.

It considered a bill to bar the Washington State Ferry system from designing, constructing or making substantial alterations to ferries or ferry facilities without the approval of the Legislature.

Rep. Larry Seaquist, D-Gig Harbor, who wrote the bill, has been sharply critical of the design of the 64-car ferries because it was built to lean to one side when not loaded with cars. That state plans to get rid of the list later this year.